Australia Avenue Developments Pty Ltd as trustee for the SOP Site 3 Partner Trust v Chief Commissioner of State Revenue [2018] NSWCATAD 144

Date of judgement 11 July 2018 Proceeding No. 2018/00285405
Judge(s) RL Hamilton SC, Senior Member
Court or Tribunal NSW Civil and Administrative Tribunal
Legislation cited Conveyancing Act 1919

Interpretation Act 1987

Land Tax Management Act 1956

Real Property Act 1900

Sydney Olympic Park Act 2001

Taxation Administration Act 1996

Transport Administration Act 1988
Catchwords TAXES AND DUTIES - land tax - liability of lessee from the Crown - s21C Land Tax Management Act 1956 - characterisation of arrangement as a lease - exclusive possession - reservations affecting exclusive possession - is lease referrable to another relationship or merely incidental to project development - definition of Crown - statutory body representing Crown
Cases cited Goldsworthy Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199

L and T (Sales) Pty Ltd v Chief Commissioner of State Revenue [2007] NSWSC 1061

Lewis v Bell [1985] 1 NSWLR 731

Living & Leisure Australia Ltd v CSR [2017] VSC 675

McNamara v Consumer Trading and Tenancy Tribunal [2003] NSWSC 349

Queensland v Congoo (2015) 256 CLR 539

Radaich v Smith (1959) 101 CLR 209

Restaurants of the Rocks Pty Ltd v Chief Commissioner of State Revenue [2008] NSWADT 20

Western Australia v Brown (2014) 253 CLR 507

Western Australia v Ward (2002) 213 CLR 1

Wik Peoples v State of Queensland (1996) 187 CLR

Williams v State Transport Authority of NSW [2004] NSWCA 179

Background

In 2014 Australia Avenue Developments Pty Ltd (“AAD”) entered into a Project Development Agreement (“PDA”) with the Sydney Olympic Park Authority (“SOPA”) under which it agreed to develop land at Sydney Olympic Park (the Land). SOPA, a statutory body representing the Crown established under the Sydney Olympic Park Act 2001 (“SOP Act”), was the registered proprietor of the Land.

The PDA also provided for the parties to enter into a construction lease to enable the development to proceed. The lease in the form approved under the Real Property Act 1900 was entered into by the parties. The lease on its face commenced on 5 November 2015 and terminated on 16 May 2020. The lease was registered on title. 

The Taxpayer was assessed for land tax as lessee of Crown land under s.21C of the Land Tax Management Act 1956 (“LTMA”) which imposes land tax on lessees under Crown leases, subject to a number of conditions which exempt certain types of Crown leases. 

Taxpayer’s argument

The Taxpayer argued it was not liable because the “lease” was not a lease in substance. The Taxpayer’s arguments were:

  1. the arrangement between the parties could not be characterised as a lease because:

    • It did not grant the Taxpayer exclusive possession to the Land;
    • The Taxpayer did not have a complete right of quiet enjoyment;
    • The “lease” was actually an ancillary arrangement to the building/development contract, granting the Taxpayer the necessary access to the Land;
  2. the Land was not owned by the Crown for the purpose of the provision. Even though SOPA is a statutory body representing the Crown, this did not mean that land owned by SOPA was owned by the Crown for the purpose of s.21C of the LTMA;

  3. SOPA was liable to land tax because a Regulation had not been made under s.10(1)(m) of the LTMA to exempt it.Therefore the Taxpayer was not liable by virtue of s.21C(6)(e), which exempts a lessee of Crown land if the Crown is liable.

Decision

  1. Is the relevant contract a lease?

    The Tribunal held that it is necessary to examine all the relevant rights as between the parties to the arrangement in order to determine what, in substance, was their objective intention. It is a necessary feature of a lease for the lessee to have exclusive possession, but the Tribunal did not accept that almost any derogation from exclusive possession would mean that the arrangement was not a tenancy. The relevant issue was whether the Taxpayer has sufficient exclusive possession.

    The Tribunal considered that it is necessary to examine all the relevant rights as between the parties to the arrangement to determine what, in substance, they intended. The words used by the parties do not necessarily determine the question of substance, although they might be relevant where the parties appear to be well advised commercial operators. The Tribunal agreed with the Chief Commissioner’s submissions that the reservations relied upon by the Taxpayer were either not true reservations, or are part of what could ordinarily be expected to be found as part of the machinery for a joint venture between land owner and developer.

    The Tribunal found that none of the provisions suggested by the Taxpayer as derogating the right of exclusive possession or quiet enjoyment, whether considered individually or collectively, were sufficiently material to change the substance of the arrangement as a lease. The Tribunal did not accept the Taxpayer’s argument that the arrangements did not amount to a lease because they were merely incidental to the wider relationship of land owner and developer.

    The Tribunal determined that on the face of it, having regard to the references to a construction lease in Clause 11.4 and Annexure O of the PDA, the conditional provisions for exclusive possession and quiet enjoyment in Annexure O, and the entry into and registration of the lease, the agreement would be characterised as a lease.

    The Tribunal noted that AAD is granted exclusive possession, not just possession, its right to occupation is for a term, and is not revocable unless AAD does not comply with an essential term of the lease, or fails to remedy a breach. The Tribunal concluded that there was a lease as ordinarily understood and the lease renders the Taxpayer a “lessee” of land for the purposes of s.21C of the LTMA.

  2. Is the land owned by the Crown?

    The Tribunal rejected the Taxpayer’s arguments, referring to the finding in Williams v State Transport Authority of NSW [2004] NSWCA 179 that privileges and immunities of the Crown is vested upon parties representing the Crown, which confirms that SOPA is the Crown as defined in s.3(1) of the Land Tax Management Act 1956.

  3. Is SOPA liable to land tax?

    The Tribunal did not accept the Taxpayer’s argument that SOPA as the owner of the land is liable for land tax because it concluded that SOPA is the Crown for land tax purposes; (SOPA is not a State owned corporation within the meaning of the State Owned Corporations Act 1989, therefore s.10(1)(m) of the LTMA is not relevant).

Orders

  1. Pursuant to s 101 of the TAA, the Assessments are confirmed.

Link to decision

Australia Avenue Developments Pty Ltd as trustee for the SOP Site 3 Partner Trust v Chief Commissioner of State Revenue [2018] NSWCATAD 144

Last updated: 13 August 2018